It’s all fine, honest! Smiling Reeves braces to unveil growth downgrades in Spring Statement TODAY… as her plans are torched by Middle East war
Rachel Reeves will insist Labor’s plan is on track today despite the Middle East threatening to wreak havoc on the economy.
The Chancellor smiled as he headed to the House of Commons to deliver his Spring Statement amid mounting questions about the performance of UK plc.
He will argue that the government has the ‘right plan for the country’, claiming that falling inflation and interest rates are putting money into people’s pockets.
But this comes at a time of growing alarm over the unfolding war in the Middle East, which has already sent oil and gas prices soaring. While there are already signs of panic buying at the pumps, concerns that the energy price ceiling may see a large increase in July were expressed today.
Even before the latest turbulence, official figures showed Britons growing poorer; GDP per capita fell for six months at the end of last year.
All eyes will be on forecasts from the independent Office for Budget Responsibility, with the government making clear this afternoon that there will be no major changes to taxes or spending.
Chancellor Rachel Reeves explains Spring Statement amid growing questions about economy’s performance
The Treasury watchdog is almost certain to follow the Bank of England in downgrading its growth rating as global instability and Labour’s massive tax raids take a heavy toll on activity.
At the beginning of February, the Bank reduced its growth forecast for 2026 from 1.2 percent to 0.9 percent and for 2027 from 1.6 percent to 1.5 percent.
The OBR could also cause major headaches for Ms Reeves by lowering forecasts for tax revenues and pointing to higher unemployment levels.
Reduced immigration, which is considered politically good news for Labor, could ironically put further pressure on public finances.
The independent body will also put price tags on some embarrassing U-turns carried out by Sir Keir, including farm tax and business rates increases.
Although the OBR will not make a formal assessment of whether Ms Reeves is on track to meet her financial targets, analysts will be able to estimate how the figures stand.
This could give an indication of whether Britons will face further tax rises in the autumn, despite hints from the Treasury that Ms Reeves is looking for ways to ease the burden after the election.
However, the Iran crisis may open another big gap in the government’s plans.
Former chancellor Jeremy Hunt said the Treasury’s rule of thumb was that a 20 per cent increase in global oil and gas prices would mean a 1 percentage point increase in inflation and a 0.5 percentage point decline in economic growth in the UK.
The government has promised to limit itself to one ‘fiscal event’ a year for its tax and spending policies – the Autumn Budget.
The Chancellor will tell MPs this afternoon: ‘This Government has the right economic plan for our country in a world that is becoming ever more uncertain.
‘Stability in public finances, investment in infrastructure and reform of our economy.
‘Building growth not with the contribution of a few people or a few parts of the country, but with a state that does not step back, but steps up, all over Britain.’
Ms Reeves would later add: ‘We have a stronger and safer economy because of the decisions we have made. Inflation and interest rates are falling. And working people are better off everywhere in Britain.’
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It seems almost certain that the OBR will follow the Bank of England in downgrading its growth rating. Pictured, observer’s predictions for November
The thermal price of natural gas reached 170p today – compared to what the OBR expects to average 78p in coming years
The OBR’s forecasts for oil and gas prices (pictured November outlook) could be dashed if turmoil in the Middle East continues.
Despite Ms Reeves’s positive tone, polling from the think tank More in Common suggested voters remained pessimistic about their own economic prospects.
The research revealed that 58 percent of voters fear that the cost of living crisis will never end, while 23 percent do not think the crisis will end this year.
The poll also found Labor was losing support from voters concerned about the cost of living.
Overall, the party retains 54 per cent of Labor supporters in 2024. But this falls to just 38 per cent of those who fear the Chancellor will never be able to get a grip on rising prices.
